MP curve lies the AP curve. The AP curve is falling
when the MP curve lies the AP curve.
d. Consider a firm whose only variable factor is labour. As
the firm hires more labour, the point of diminishing
marginal productivity sets in once the marginal product of
labour reaches a.
e. As more and more labour is applied to a fixed amount of
physical capital, we can expect that the marginal product
of labour will eventually. In the extreme, if total
output decreases as additional labour is added, then the
marginal product of labour has become.
3. Fill in the blanks to make the following statements correct.
a. For given factor prices, when average product per worker
is at a maximum, average variable cost is at a.
b. If marginal costs are above average costs, then producing
one more unit of output will the average cost.
c. Average variable cost curves are U-shaped because
eventually diminishing average product of the variable
factor implies eventually average variable cost.
d. Eventually diminishing marginal product of the variable
factor implies eventually marginal costs.
e. The level of output that corresponds to a firm’s minimum
short-run average total cost is called the of the firm.
f. Consider a firm whose only variable cost is labour. A
wage increase will lead to a shift upward of the firm’s
curve, curve, and curve.
